Alright, time for "Bible with Baqqrih." Let's start with that quote you mentioned. It comes from John's Gospel, and fully, it says:
>If you were of the world, the world would love you as its own; but because you are not of the world, but I chose you out of the world, therefore the world hates you. - Gospel of John, Chapter 15, Verse 19
So, to be "of the world" is what Jesus is talking about avoiding. What does he mean by that? First, let's look at the Greek for it. The word for "world" here is the Greek term "cosmos." This term also appears in a separate text by John, that being his First Epistle, and in the context of its usage, John writes:
>We know that we are from God, and the whole world lies in the power of the evil one. - First Epistle of John, Chapter 5, Verse 19
So, this "cosmos" we are hearing of refers to a world separate of Godliness. The world we are physically in is currently Satan's realm. Yet, Christ does not say, "if you were in the world, the world would love you," for, clearly, a Satan-influenced world hates us no matter if we exist in it or if we have already departed from it, because God is of love, and Satan is contrarily of hate. We are certainly in the world, physically-speaking, and yet, we are not of the world because, through being the faithful of Christ, we do not accept its lack of Godliness. We strive for Godliness on this planet. The church is the result of this strife.
I will now justify theocratic governance with an analogy. Picture a gloomy tundra; its crisp, chilling snow breezing across your face as you sit in such jabbing frigidness. You are surrounding a campfire with all of who you love, with all of your family and fellows desperate for warmth, yet with the flames only staving off your fittest few from perishing as the frost grows upon each shivering skin. Lacking the growth of the flames, what warmth will be left for the rest to bask in? Lacking the growth and expansion of the church, what goodness will be left for the rest of our growing faithful to be guided by?
We are not to be of the world--that is for certain--yet we are to be the remainder of what is good in the world, and while evil will always outmatch us in quantity until the return of our Lord Christ, it is only justifiable that the remainder of the world's goodness grows, for that is why Christ established the church to spread among all of the world's nations. Yet, if we only let it prosper under other authorities in the world, how will it truly spread to its furthermost extent?
That is our goal, after all, to forever chase our extent of spreading goodness. If The Lord has told us to advance our faith to the four corners of this planet, then dog-earing those corners with such pitiful weakness by wallowing in resignation and thinking that we're feebler than we are will not guide us towards fulfilling God's intention. As such, the church must not remain forever under the rest of the authorities that are present in the world, as it must be an authority in the world to leap forth closer to its furthest extent of our faith's expansion.
I hope that's a fulfilling-enough explanation.